Tag Archive | "Sergio Marchionne"

Fiat Chrysler Profit Increases 69%, Most of It From North America


DETROIT —  Fiat Chrysler Automobiles on Thursday reported a big gain in second-quarter profits and assured investors that its recent record-setting penalty for safety violations would not slow its earnings momentum, reports the New York Times.

The Italian-American automaker said that its net income climbed 69 percent in the quarter to 333 million euros — about $363 million — compared with the period a year ago.

The company’s chief executive, Sergio Marchionne, attributed the gains to healthier profit margins in the North American market and surging sales of Jeep sport utility vehicles.

Mr. Marchionne told analysts that he did not expect any long-term financial impact from the company’s consent order on safety violations reached with the National Highway Traffic Safety Administration.

On Sunday, the agency imposed civil penalties of up to $105 million on Fiat Chrysler for failing to complete recalls in a timely manner and to provide proper notification to consumers, dealers and regulators.

The consent order followed an investigation by regulators into 23 recalls covering more than 11 million vehicles.

Mr. Marchionne said the company was committed to improving its safety practices, particularly in its communications with consumers. “There are no excuses,” he said in a conference call with analysts.

He added that the penalties imposed by the safety agency should not hinder the automaker’s performance.

Fiat Chrysler will pay a $70 million cash fine and is obligated to spend $20 million on a variety of performance issues, including repurchasing Ram pickups with faulty suspensions that can cause drivers to lose control of the vehicles.

Fiat Chrysler could be assessed an additional $15 million in penalties if more safety violations are found by an independent monitor. “Neither us nor N.H.T.S.A. want to see that amount paid,” Mr. Marchionne said.

With its safety issues resolved for now, the company can focus on its growth plans, which include expanding global Jeep sales and revitalizing its Alfa Romeo luxury brand.

Fiat Chrysler revenue in the second quarter rose 25 percent from a year ago to €29.2 billion, or about $31.8 billion. In North America, its profit margins more than doubled, to nearly 8 percent.

General Motors and Ford Motor reported even higher profit margins in North America, where new vehicle sales are reaching their highest levels in several years.

“We are still far away from where our other two competitors are,” Mr. Marchionne said. “It is an indication of the amount of work that needs to be done by F.C.A. in the United States.”

The second-quarter results impressed investors, as Fiat Chrysler’s stock gained 7.3 percent to close at $15.58 in trading on Thursday on the New York Stock Exchange.

The company has several big tasks, including a public stock offering for its Ferrari luxury sports car division.

But on a possible merger between Fiat Chrysler and another automaker, Mr. Marchionne was somewhat circumspect.

In his previous conference call with analysts after first-quarter earnings, Mr. Marchionne created a stir by calling for carmakers to find merger partners to contain costs for new products and technology.

It was later revealed that he had tried to start merger talks with G.M. in March, but his overture was rejected.

On Thursday, he said he still believed mergers made sense for the overall industry. But he did not tip his hand on whether Fiat Chrysler was engaging in such talks with other car companies.

“You need to let us work on this, and I’m sure we will come up with the right answer,” he said.

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Fiat Chrysler Answers NHTSA Recall Questions


Fiat Chrysler Automobiles NV on Monday said it has responded to detailed demands from federal auto safety regulators who want information about 20 recalls covering more than 10 million vehicles since 2013, reports The Detroit News.

The National Highway Traffic Safety Administration said last month it was ordering Fiat Chrysler to attend a July 2 hearing to explain its handling of auto safety recalls in an unprecedented public hearing. It gave the company until 5 p.m. Monday to respond to questions.

Since the demand for information, Fiat Chrysler has taken a more conciliatory tone with NHTSA.

“FCA US LLC has responded to NHTSA’s special order. We take seriously the safety and satisfaction of our customers and remain committed to continuously improving our products. FCA US strives in all cases to complete full investigations, develop robust remedies and execute recalls in a timely manner, as evidenced by our campaign completion rates,” the company said in a statement. “However, we continue to be open to additional measures that would further improve our performance.”

The 12-page order demanded all reports of fires, crashes and deaths; repair bulletins sent to dealers; and all lawsuits related to recalls.

Fiat Chrysler also had to provide a sworn statement under oath from a senior official attesting that a search for all documents had been made. It had to describe in detail what it has done to get as many recall repairs completed as possible. The company declined to make the document public, saying it was up to NHTSA.

The highly unusual action came after NHTSA has raised sweeping concerns about Fiat Chrysler’s conduct in auto safety issues, saying it has failed to recall enough vehicles, send notices to owners fast enough or ensure that dealers repair enough vehicles.

Last month, Fiat Chrysler CEO Sergio Marchionne said the firm wanted to work more closely with NHTSA.

The public hearing, at which the government and Fiat Chrysler can call witnesses, is the first for the auto safety agency since 2012, when it demanded that a small manufacturer of three-wheel vehicles fix its products. And it is the first ever to focus on a series of recalls by one automaker. Marchionne will not testify, he said last month.

After the hearing, NHTSA could order actions to speed fixes or force the automaker to buy back vehicles believed to be unsafe. It also could hand down tens of millions of dollars in fines. But Fiat Chrysler could appeal, and the agency would have to go to federal court to compel it to take action.

Fiat Chrysler could face harsh scrutiny and painful testimony. NHTSA is likely to call investigators to testify about problems in the 20 recall campaigns. Members of the public are likely to testify and could bring graphic photos of loved ones killed in crashes; they also will be able to submit written testimony.

It marks the latest battle between NHTSA and Fiat Chrysler over the last two years. Conflicts date to the government’s demand for the recall of 2.7 million Jeeps linked to more than 50 deaths due to gas tank fires that have occurred when SUVs are hit from behind. In recent months, the agency has questioned a growing number of Fiat Chrysler actions.

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Fiat Chrysler Boss Says Tougher U.S. Safety Stance Will Raise Costs


U.S. vehicle safety regulators’ tougher posture toward automakers is a “new phase” in the government’s relations with the industry and will likely mean higher costs, Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne said Tuesday, reports Reuters.

“We’re beginning to live through a new phase of regulation in the United States,” Marchionne told reporters after the head of the U.S. National Highway Traffic Safety Administration criticized Fiat Chrysler’s handling of recalls.

NHTSA chief Mark Rosekind on Monday said the agency was reviewing Fiat Chrysler’s handling of 20 recalls and criticized the automaker for failing to act aggressively enough to repair 10 million vehicles covered by the actions.

He said the agency could fine Fiat Chrysler up to $700 million and compel it to buy back vehicles. The agency also planned a public hearing in July to examine the company’s behavior.

Marchionne said FCA would “work with the agency in a cooperative way … and meet their requirement”.

But he said the regulator’s “different attitude” was “bound to increase the costs of execution of the car” because of additional measures automakers would have to take to comply with safety rules.

Marchionne and FCA’s U.S. arm, the former Chrysler Group, have tangled with regulators in recent years, notably over the scope of a recall to address concerns that fuel tanks in certain Jeeps posed a risk of rupturing and catching fire in rear-end collisions. Chrysler ultimately agreed to recall nearly 1.6 million Jeeps and install trailer hitches to protect the gas tanks.

“I just want clear rules,” Marchionne said. “This is the only thing that we, humbly, will request … We can’t change the rules after the event.”

Marchionne also said that NHTSA may have unrealistic expectations about how many vehicle owners would bring cars back to dealers to get recall-related repairs.

“The willingness of us to repair 100 percent is on the table. But the likelihood of us getting 75 percent of the cars in that period of time even if we work our buns off is limited,” he said.

He was referring to a NHTSA target for automakers to repair 75 percent of the vehicles covered by a recall within 18 months.

FCA has not made a decision on where to build its next-generation Jeep Wrangler, Marchionne said. The model is currently built in Toledo, Ohio.

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Fiat Chrysler Wants to Play Major Role in Industry Consolidation: CEO


Chief Executive Sergio Marchionne wants Fiat Chrysler Automobiles to play a key role in a consolidation of the global auto industry which he sees as inevitable to manage prohibitive capital costs, reported Reuters.

Speaking on Thursday to shareholders in Amsterdam, away from Fiat’s historic roots in Turin and Chrysler’s in Detroit, Marchionne said: “We don’t want to stay behind in a process that is changing the industry, that is not a possibility.”

Marchionne declined to comment about the chances of a tie-up between the world’s seventh-largest carmaker and U.S. rival General Motors, but said the company was talking to many parties, without giving details.

“We have talks ongoing with various operators on various topics,” he said.

Fiat completed its buyout of U.S. arm Chrysler last year and moved the primary listing of the merged group to New York. The company is now incorporated in the Netherlands and has its headquarters in London.

Marchionne said work to spin-off and list luxury unit Ferrari was ongoing and he expected the floatation to happen this year, although he suggested the process may spill over into 2016.

He said the company had no plans to list any other brands.

Last year, the carmaker decided to spin off Ferrari, sell a 10 percent stake via a public offering and distribute the rest of FCA’s stake in the luxury sports car brand to its shareholders.

Marchionne reiterated that FCA might introduce a loyalty share scheme as part of the spin-off, which could give long-term investors multiple voting rights, although there was no final decision. This could allow Fiat’s founding Agnelli family to keep their grip on Ferrari even with fewer shares.

“We are evaluating it, it’s a solution that has worked well for CNH Industrial and FCA,” he said.

Marchionne confirmed the company’s targets for this year, even though its individual geographic areas are yielding different results than initially expected.

In two weeks, the carmaker will inaugurate a new plant in Brazil. Marchionne has previously said he expected the Pernambuco plant to help FCA return to double-digit profit margins in that market.

Marchionne said margins in the North American region were recovering, dismissing concerns from industry analysts suggesting that FCA’s use of incentives was too aggressive.

“Our pricing policy is in line with that of our competitors,” he said, adding that some models were sold at lower prices because they had less advanced technology than those of competitors.

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Chrysler Ordered to Pay $150M due to Jeep Fire


A Georgia jury on Thursday awarded $150 million to the family of a boy who burned to death in a 1999 Jeep Grand Cherokee after a rear-end collision, finding Fiat Chrysler LLC’s rear-positioned fuel tank in the Jeep posed a fire risk and killed the child, reported The Detroit Bureau.

The Decatur County, Georgia, jury reached the verdict just hours after closing arguments concluded the eight-day trial, granting the family’s request for $120 million for the full value of 4-year-old Remington Walden’s life. Jurors found that Fiat Chrysler knew of the potential danger and the jury said Chrysler, the maker of Jeeps, must pay.

The jury ruled that Chrysler acted with reckless disregard for human life in selling the family of Remington “Remi” Walden a 1999 Jeep with a gas tank mounted behind the rear axle.

Walden, of Bainbridge, Georgia, was killed when the Jeep driven by his aunt was hit from behind by a pickup truck in March 2012. The fuel tank leaked, engulfing the Jeep in flames and killing the boy.

The verdict comes nearly two years after Chrysler compromised with a federal safety agency and agreed to a scaled-down recall of some older-model Jeeps with the rear-mounted tanks. The tanks have little structure to protect them if struck from behind, making them susceptible to punctures and fires.

Federal documents show that at least 75 people have died in post-crash fires because of the rear-mounted fuel tanks.

The 11-woman, one-man jury ruled after a nine-day trial that Chrysler was 99% at fault for the crash and the pickup driver was 1% at fault. Jurors also determined that Chrysler failed to warn the family of the hazards of driving the Jeep. They ruled that the Waldens should get $30 million for Remi’s pain and suffering and $120 million for the full value of his life, according to a verdict form.

Mike Palese, spokesman for Chrysler parent company FCA US, said the company is disappointed with the verdict and would appeal. Chrysler, he said, was prevented from presenting data submitted to federal safety regulators showing that the vehicles did not pose an unreasonable safety risk.

“The vehicles are not defective,” Palese said.

During the trial Fiat Chrysler Chief executive officer Sergio Marchionne has defended the safety of Jeep products. He also denied trying to stop top federal regulators from finding a safety defect in older Jeeps with rear-positioned fuel tanks. Instead, he argued that the vehicles are safe, in a recorded deposition that was played for Georgia jurors in a wrongful death trial over a fuel tank fire that killed the boy.

The automaker firmly believes the older Jeep SUVs with gas tanks located behind the rear axle are no more susceptible to fires than other SUVs, Marchionne said.

“Our analysis of that data suggested these were defect-free vehicles, and that they performed exactly as the rest of the comparative class performed in the marketplace at the time. Our analysis suggests very clearly that this is not a defect,” Marchionne said in video-taped deposition.

Under government pressure, Fiat Chrysler recalled an estimated 1.56 million 2002-07 Jeep Liberty and 1993-2004 Jeep Grand Cherokee SUVs for the problem in June 2013, and agreed to install trailer hitches to protect the gas tanks. In an abundance of caution, it sent letters to 2.27 million owners, though it is not clear how many are still on the road.

Fiat Chrysler notes the vehicles met safety requirements at the time they were built, and insists they are not defective. The company also agreed to conduct a customer service campaign for another 1.2 million 1999-2004 Grand Cherokees.

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Fiat Chrysler Wants to Collaborate With Others on New Vehicles


Fiat Chrysler Automobiles Chief Executive Sergio Marchionne said his company is in talks with other automakers to share the costs of developing new vehicles and technology, particularly to cut greenhouse gas emissions, and called on the United States to ease fuel economy targets for 2025, reported Reuters.

“I think (automakers’) costs … (are) well in excess of what I consider a mature industry to be able to afford,” Marchionne told reporters at the Detroit auto show on Monday.

The U.S. government wants automakers to average 54.5 miles per gallon of gasoline for their lineup of vehicles by 2025. Marchionne said that with gasoline prices sliding to $2 a gallon or less, consumers have less incentive to pay extra for advanced fuel-saving technology. The U.S. Environmental Protection Agency will review the targets by 2018, and Marchionne said he expects other automakers to lobby the EPA to extend the timetable for achieving the 54.5 mpg target and the corresponding target for carbon dioxide emissions.

Marchionne deflected questions on whether FCA was in merger talks, but said that automakers’ relatively low stock values reflect investor perceptions that car companies are wasting capital producing their own versions of commoditized technologies, such as the hardware for four-cylinder engines.

Recently, separate media reports suggested that the Italian carmaker was talking to PSA Peugeot Citroen and Volkswagen about a potential tie-up. Both reports were denied by Fiat and the French and German companies.

FCA’s October announcement that it would spin off luxury unit Ferrari prompted speculation that the automaker would seek another merger partner, possibly to plug a hole in Asia.

Marchionne said Ferrari will always stick to its policy of keeping production levels below market demand, and dismissed speculation that the luxury group could significantly increase sales after the spin-off.

“To cite Enzo Ferrari, we will always sell one less Ferrari than the market wants,” said Marchionne, who also serves as Ferrari chairman. “That’s a policy that will never change.”

FCA plans to sell 10 percent of Ferrari via a public offering and distribute the rest of FCA’s stake to its shareholders. A bond issue may accompany Ferrari’s IPO in the second quarter, Marchionne added on Monday.

He said he expects the car markets in Europe, Brazil and the United States to post single-digit growth in 2015.

He said FCA would sell more than 5 million vehicles this year, up from an expected 4.7 million in 2014. The carmaker also expects to report 2014 results in line with guidance, he added.

The group said earlier on Monday it would add more than 1,000 workers at its Melfi plant in southern Italy thanks to “extremely positive” sales for its new Jeep Renegade and Fiat 500X models, allowing it to fully utilize the plant’s production capacity.

Marchionne said the new positions were a “big step forward and a positive sign for the country.” FCA will also end a state-backed temporary layoff scheme at the plant, allowing 5,418 employees to return to work full-time.

The positive results at Melfi are just a first step in FCA’s bid to make its European operations profitable by 2016.

They are part of a bigger goal to invest 48 billion euros ($56.73 billion) over five years to 2018 to boost sales by 60 percent to 7 million cars and increase net profit five-fold. Analysts have called those targets highly ambitious, but Marchionne reiterated on Monday that those targets still stood.

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